Currys to focus on loyalty over customer acquisition amid pressures of inflation

Currys is focusing on building a base of “valuable customers who keep coming back”, as the electronics and telecommunications group anticipates a decline in profits next year due to the pressures of inflation

With 80% of UK households already shopping at Currys, group CEO Alex Baldock told investors today (7 July) the retailer isn’t actively looking to grow its customer base further. Instead, the business wants to create “customers for life”.

“Our prize is to grow our share of wallets with those customers,” he said, as the business announced its financial results for its most recent fiscal year ending 30 April.

“As the leading technology retailer in all our markets, with the ability to serve customers across both channels, we have a significant opportunity to increase our share of customers’ tech spend. This starts by using data to fuel CRM and personalisation.”

While Currys’ upgraded and rebranded ‘Perks’ loyalty scheme in the UK is still in “very early days”, it’s showing “encouraging signs”, Baldock said. He credits it with helping to grow the retailer’s UK customer base to 11.1 million, up 16% year-on-year.

Currys is also seeing a 20% increase in average order value for members of the customer club versus non club members, as well as a “relatively modest but early” double-digit uptick in shopping frequency, he added.

Baldock also highlighted credit as a way to build a “stickier” customer base. The retailer’s credit customers increased by 22% to 1.7 million over the year, while credit sales were 21% higher, driven by growth from both new and existing customers. The adoption rate of credit climbed by 2.5 percentage points to 13.3%, with online adoption “nearly matching” that of stores.

“Credit is good for customers, and it’s good for us,” said Baldock, claiming that credit is now making a “meaningful contribution to profits”.

In this category customers prefer to shop both online and in-store.

Alex Baldock, Currys

Amid the cost of living crisis, credit allows people to spread the price of their purchases. Baldock claimed that credit customers are 12-points happier in customer satisfaction than non-credit customers, and are 70% likelier to come back and shop with Currys.

The retailer is “confident” it will reach its 16% targeted adoption rate by 2023/24

Reflecting on the group’s performance over the last year, Baldock and chief financial officer Bruce Marsh were upbeat, stating it had delivered “strong results from a stronger business”. However, overall sales in the UK and Ireland were down 4% on a like-for-like basis compared to a “very strong 2020/21”.

The retailer is also taking a “prudent” approach to its outlook for the financial year, given the economic climate and uncertain consumer sentiment. It currently forecasts its adjusted profit before tax (PBT) will be between £130 and £150m. This would be a decrease from this year, when reported adjusted PBT was £186m.

Taking an omnichannel approach

However, the group saw sales rebound strongly online over the last year, with a 61% increase in in-store sales in the UK and Ireland as consumers returned to physical shopping after the pandemic. The share of online sales in the market dropped 20% to 45%.

“The stores have rebounded more strongly than anyone expected, including us,” said Baldock, adding that in future he expects the split between online and in-store sales to be “roughly 50:50”.

“In this category customers prefer to shop both online and in store,” he added, stating that the business is now focused “more than ever” on three “big customer benefits” enabled by its omnichannel strategy

The first benefit is that stores are “never out of stock”, as it now allows customers to make online orders through in-store staff. Sales through the system are 118% higher than two years ago in the UK.

Customers can also get hold of their purchases the same day as they order online through the retailer’s ‘Order & Collect’ service, which grew 18% over the year, and can get expert face-to-face advice both in-store and through ShopLive video shopping.

“Since stores opened, we continue to see higher customer satisfaction, stronger conversion, and larger average order values than unassisted online,” Baldock said

Currys rebrand: Four brands become one as it ‘invests hard’ in simplified proposition

Last year Currys launched a new website in the UK, which the company said will fuel more upsell and cross-sell through better recommendations and personalisation. The company said the money and work that has gone into this new website will start to bear fruit at the end of the next financial year.

“We’re investing in both [online and offline] to make sure that however the future pans out, we’re going to be ready for it,” Baldock said.

Pressures of inflation

While investment in training in-store staff is one crucial pillar of Currys’ omnichannel strategy, this is an investment that has risen considerably with inflation. Baldock said the retailer has “cheerfully swallowed” the £22m worth of wage inflation that it has paid to its “capable and committed colleagues”.

In the UK and Ireland, non-product costs have risen by more than £50m due to inflation. In the coming year Currys is more likely to feel the full effect of inflationary pressures, the business said, as consumer spending and sales take a hit. It will attempt to offset these through its “ongoing saving programmes and vigilant day-to-day cost controls”, CFO Marsh said.

However, according to Baldock, Currys will also be “doubling down” on its customer offer and doing “all we can” to help customers through the cost of living crisis. The retailer is introducing a new price freeze on dozens of products, is investing in its energy-efficient ‘Go Greener’ range to help customers lower fuel bills, and is introducing a ‘12 month Pay Delay’ on every purchase over £99 to help customers spread costs.

It will also continue to invest in providing purchase protection, repairs, and refurbishment to give technology a longer life and help customers get the “best value” out of their existing tech.

“We won’t be beaten on price, we will use our extended ranges to offer products at lower price points and we can help customers spread the cost of technology through responsible credit,” Baldock said.

“We can do this because we have unique capabilities and scale in this area and our diversification will continue to help us to outperform the market.”